Artisan IPO has blazing start

Stronger initial-public-offering and equity markets, combined with high employee ownership and plans to pay a dividend, helped www.artisanpartners.com/">Artisan Partners Asset Management Inc. raise $333 million Thursday, its first day as a publicly traded company.

Artisan shares opened at $35.20 Thursday and eventually climbed above $39 before closing at $38.83 on the New York Stock Exchange.

The Milwaukee money-management firm had the best first-day gain for an asset manager's IPO since February 2007 when Fortress Investment Group LLC went public, said Greg Leffert, a research analyst at Renaissance Capital, a Greenwich, Conn., firm that manages the Global IPO Fund.

Artisan also had the fifth-best first-day return so far this year for an IPO, Leffert said.

Artisan raised the $333 million by pricing its offering of 11.1 million shares at $30 a share Wednesday night, above the planned range of $27 to $29 a share. The fact that the offering pulled in buyers above the range showed there was strong demand. More than 2.7 million shares changed hands, making Artisan one of the most heavily traded stocks on the exchange for the day.

From a market-timing perspective, now is a good time to go public because the stock market has been strong, said Greggory Warren, a senior stock analyst at Morningstar Inc. However, for investors, he said, stocks of asset managers in general are now "fairly valued, if not overvalued."

Many investors are attracted to the asset management business model, where if a firm charges a 1% management fee and the stock market rises by its historical average of 9% in a year, the firm's revenues will rise by 9%, said Robert J. Bukowski, managing director at Alpha Investment Consulting Group in Milwaukee.

Artisan employees will own 52% of the outstanding shares, which likely helped attract investors looking to align their interests with those of employees, Leffert said. The company will pay a quarterly dividend of 43 cents a share, or a yield of 1.4%, based on the offer price.

Artisan issued three classes of stock for the public, for employees and partners, and for founders Andrew and Carlene Ziegler and certain outside investors.

Although shareholders' interests will be aligned with those of employees, they will not have a say in how the company is run. The three-share-class structure initially gives Andrew Ziegler sole power to elect the board of directors and control the company. A stockholders committee will eventually gain that power, but investors who bought Class A stock will not be invited to be part of the committee, according to documents the company filed with the Securities and Exchange Commission.

Artisan was formed by the Zieglers, who left Strong Funds in 1994 with ambitions to create a very different firm. They built Artisan by choosing areas of the market where they thought they could add value and by giving money managers autonomy and part ownership.

Led by Executive Chairman Ziegler and Chief Executive Officer Eric Colson, the firm offers funds including the top-performing Artisan International Value Fund, which beat 99% of peers over the past five years, according to data from Bloomberg. The Artisan Mid Cap Value Fund beat 97% of rivals over the past five years. The team that runs the fund won Morningstar Inc.'s award for best domestic stock- fund manager in 2011.

"I think their overall investment performance will help them," said Geoff Bobroff, a fund consultant in East Greenwich, R.I. "As a public company they'll be faced with a lot of things, but investors and intermediaries like Artisan's products, and that's a good sign for them."

Artisan planned to use $90 million of the proceeds to repay all of its outstanding loans; $67.1 million to buy back 2.6 million shares from early investors; and $61.3 million to distribute to pre-offering partners, according to SEC filings. The company also said that shortly before the offering it would distribute $56.8 million of incentive compensation payments to portfolio managers and $40 million to pre-offering partners, the filings said.

Artisan managed $79.5 billion in assets as of Feb. 15, according to an SEC filing. Net income fell 75% in 2012 to $33.8 million as expenses related to compensation climbed, according to regulatory filings. Revenue for that year was $505.6 million.

Citigroup Inc. and Goldman Sachs Group Inc. led the offering. The company is listed under the symbol APAM on the New York Stock Exchange.